What are the different types of accounting in rental management?
The accounts of a real estate agency that works via rental management mandates can be kept in two distinct ways:
- Cash accounting
- Commitment accounting
Cash accounting allows you to keep track of your real estate agency’s expenses and revenues. As a result, it’s a question of genuine money outflows and inflows, such as collecting fees while collecting rent or purchasing office supplies.
On the other hand, Accrual accounting adds non-monetary transactions to the equation. Rent calls will display prominently among the entries, even though the renter has not yet paid them, leaving the latter with a debt to the real estate firm.
What is extra-accounting accounting?
Rents sought but not yet paid are not included in a cash accounting. However, such information is required to determine where the payments are made. This monitoring allows you to pinpoint payment delays, send out reminders, and act in the event of non-payment. Extra-accounting accounting is used in this situation. You may improve the management of your real estate agency by having a complete list of rental calls sent, their date, and their status.
It’s worth noting that accrual accounting incorporates non-accounting accounting, allowing these controls to be implemented.
How do you recover unpaid rent?
It is essential to collect outstanding rent based on commitment accounting or non-accounting documentation. The real estate agent has three years from the first day of late payment to reclaim the money owed.
The first step is to try to reach an amicable agreement. You’ll need to make contact to do so, which will lead to a written reimbursement arrangement with due dates and amounts.
The second step is to give the tenant a formal notice to pay the rent. It is done by a formal letter either mailed with an acknowledgment of receipt or delivered by hand with a signature.
Then comes activating the taken guarantees, such as a natural person’s or an organization’s security. The procedure should not take too long: specific organizations have rapid activation times, such as the Visalia guarantee, which takes only 15 days.Finally, legal ways of collecting rents are required without outcomes or promises. It is what you should get: A command to pay: after the intervention of a bailiff, the tenant has a maximum of 2 months to pay. Beyond this period, the lease is terminated, and you can sue the tenant.
You must report receipts at the same time as total income. If the owner chooses the actual regime, he must also reveal his expenses so that you can calculate his net income.
It’s essential to remember that accounting must follow the cash accounting principle. Expenses and revenue are acknowledged explicitly at the time of payment. It means that work completed in late 2021 but paid for in early 2022 can only be deducted in 2022. Similarly, if a tenant paid his December 2020 rent in January 2021, you must include the rent in the revenue for 2021.
The category changes for dwellings rented through a non-professional furnished rental firm (LMNP), as it is no longer a subject of property income but instead of industrial and commercial profits (BIC).
The owner can deduct all his expenses and even depreciate his property for tax purposes in this situation (which has the advantage of reducing or even reducing the taxable profit to zero). We are, on the other hand, a commitment accounting. The period to which the product or expense pertains, not the payment date, is essential. As a result, even if a December rent is paid late, it must be accounted for in the same month.
Finally, LMNP rental requires the development of a tax package that must be sent to the tax authorities no later than the beginning of May each year. Due to these responsibilities, an accountant is strongly recommended to accompany you.About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud platform where their QuickBooks™️ file, critical financial documents, and back-office tools are hosted in an efficient SSO environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.